00:05:23 · Jon Ferro, Tom Keene, Lisa Abramowicz, Jeff Rosenberg, S1, Priya Misra
[00:05:23] S3: Sure. Fine. [00:05:24] S5: Okay, that's great. But he wants to walk away from modern culture. monetary analysis and the foundation of that. A guy like Michael Feroli at JP Morgan, I don't know what he does with new monetary medicine and protocol from the 50s. [00:05:40] S3: I'm thinking about who might be happy with this decision. If I'm Dario at Anthropic, I'm probably pretty happy with this decision and that news conference. I'd be pretty thrilled with how that went. Essentially, an IPO coming up in a few weeks. Yeah. [00:05:51] S0: I mean, essentially, if you have someone who is concerned about any kind of market disruption in credit spreads. [00:05:56] S4: Tied to AI. [00:05:57] S1: Probably feeling pretty good. [00:05:58] S0: That probably is a positive. [00:06:00] S3: Got Priya Misra at J.P. Morgan with us around the table. Priya sat through that. Priya, well done. [00:06:03] S1: It's good to see you. That was fun. It was a difficult one, wasn't it? What did you learn? [00:06:07] S6: You know, I think Chair Warsh was trying to walk this fine line of saying that they're already committed to inflation and yet they didn't hike. I think he was trying to communicate this hawkish hold, but it's hard. But I would take a step back. There's the policy and then there's the communication. The policy, you saw the market reaction right after. I don't think the market was saying that the Fed's behind the curve on inflation. [00:06:29] S1: They've hiked.
00:06:29 · S1, Priya Misra, Tom Keene
[00:06:29] S1: They've hiked. [00:06:30] S6: They're likely to hike some more. I think the market was okay with policy. What I was hoping to get from Warsh, which we didn't really get, was explain the decision. He could have talked about inflation breadth. He could have said, we're not data point dependent. You know, the inflation trend is heading lower. He really didn't talk about the data. So we didn't get much on the decision. I was hoping to hear something more on, is this risk management, removal of the risk management cuts, or is this risk management hikes, or are we recalibrating the neutral rate? We didn't really get that. And then something on financial conditions. I think we got a little bit on that. I think the Fed did get a little spooked with the move in interest rates. I mean, we talk about Halloween costumes. My point a month ago was the tenure should be the Halloween costume. My kids refused to even walk with me. [00:07:15] S1: Now it's not the tenure. [00:07:17] S6: It's my latest as AI, Dr. Jekyll and Mr. [00:07:20] S5: Hyde. [00:07:21] S6: But, you know, it's not the Fed. So at least I think today is not like July. I think it wasn't a complete miscommunication. He did leave a lot more questions. We're going to have to listen to every other Fed official, wait for meetings. I personally like more meetings because I think the decision speaks more than what he's going to tell us at the press conference. But we'll have. [00:07:39] S1: Not to be too snarky, you want more of those meetings? So, you know... They're the meetings you get it.
00:07:39 · S1, Priya Misra, S2, Lisa Abramowicz, Tom Keene
[00:07:39] S1: Not to be too snarky, you want more of those meetings? So, you know... They're the meetings you get it. [00:07:44] S6: The policy decision was useful. The dots are useful. We might go, you know, the dots might go away. [00:07:49] S2: But the. [00:07:50] S6: Yes, his communication, I think, did not tell us much about the reaction function. [00:07:53] S0: If you want to dress like the 10-year, I'll walk with you, because I think that that's actually quite scary for a lot of different officials right now. What do you make of this commentary that he made about what happened in markets, that financial conditions seem to have tightened? And This sort of nod to that as the one thing that could have justified remaining on hold. [00:08:11] S5: Right.
00:08:11 · Tom Keene, Priya Misra, S1
[00:08:11] S5: Right. [00:08:12] S6: I think so monetary policy works into the economy through financial conditions. So the fact that he said the financial conditions have tightened and that's kind of what they expected. I think it's telling you that that's how monetary policy works. So all this idea that the AI trade is not interest sensitive, I think he's pushing back against it. That's the area he was a little explicit in. And so when we talk about he's buying time for what, it's not just the labor market and inflation. It's going to be financial conditions. If the air is coming out of the AI trade, well, interest rates might come down, but financial conditions might tighten. And then the market's doing the work for the Fed. I don't think he wanted to say it because when he said it in July, that was a problem. It looked like the market might bully the Fed. But I do think that this Fed chair looks, and it's not just chairwash. [00:08:58] S1: I think the rest of. [00:08:59] S6: The Fed, I mean, we heard from Williams and Jefferson. I think they looked at the market and said, this is doing the work. So we can actually then, the urgency goes down for us to hike.
00:08:59 · Priya Misra, Tom Keene, S1
[00:08:59] S6: The Fed, I mean, we heard from Williams and Jefferson. I think they looked at the market and said, this is doing the work. So we can actually then, the urgency goes down for us to hike. [00:09:08] S5: He talked about protocol. And he's written before about McChesney Martin, 1951 and the accord. To me, he's almost wistful to go back to another time. I felt like I was watching Tobey Maguire and Reese Witherspoon in Pleasantville. We're back to the 50s, like back before Burns, back before the 60s, back to a simpler time. He's yearning to go back there. How does that dovetail with a cacophony of responsibilities we have in monetary policy linked into fiscal policy? [00:09:39] S6: It's very hard. Now, I see the point about going back, because if you look at big productivity increases, we might. [00:09:44] S5: Be— But we're not the same economy we were in the 50s. Our news flow alone— I mean, Jon has personally moved British pound at least six times on this show. I mean, the speed of news flow today, he's not allowed to go back to that. wistful thinking. [00:10:01] S6: I think which is where I wish we could get a better sense of the reaction function because then the market will react to data points. And it doesn't just have to be inflation and the labor market. It could be the earnings of some large hyperscale or it could be to the issue equity or debt. But let the market react to all this information if we have a sense of the reaction function. We are getting a better sense today than we were, I'd say, in July. [00:10:25] S1: I'll give you that.
00:10:25 · S1, Tom Keene, Priya Misra, Jon Ferro
[00:10:25] S1: I'll give you that. [00:10:27] S5: I'll give you it better than July. [00:10:28] S6: We're just piecing it together and we're realizing there's not just the chair wash reaction function. There's every other of the 19 members reaction function that we need to. So maybe AI can help us get some. [00:10:39] S5: I got a question to fit into Jon Ferro here. Jon, you've stood on the lawn of the ECB. I talk about this stuff. You've actually done it. How does the Bank of England, the ECB, how do they react to what I just witnessed? [00:10:53] S1: The lack of guidance? The lack of analysis? [00:10:56] S5: Some people would say the MBA happy talk speak I just heard. [00:10:59] S3: Tom, without criticizing too many people, I think people have had experience of that at the ECB for the last several years. [00:11:05] S5: Okay. [00:11:06] S1: Same situation.